MINUTESOFTHEMEETINGOFTHETRUSTEES.docVIP

DERIVATIVES RISK STATEMENT [Insert name of your SMSF] The trustees have resolved that the following Derivatives Risk Statement be adopted and implemented for the XYZ Superannuation Fund. Introduction The Superannuation Industry Supervision Act (SISA) requires a Derivatives Risk Statement (DRS) to be in effect for a Superannuation Fund where a charge is given, in relation to the use of derivatives by the trustee of the Fund. Overview The Trustees of the Fund confirm that when using derivatives the following objectives will be considered: -A derivative investment must be intended to support the fund’s overall investment strategy. -The purpose of making a specific derivative investment must be consistent with the investment objectives of the fund. -All investment guidelines in respect of each member must be complied with. Reasons for using Derivatives The Trustees of the Fund confirm that the reasons for using derivatives in the Fund are as follows: -Writing (selling) covered options to produce extra income for the fund. -Hedging the portfolio against the risk of adverse movements in market prices and thereby reducing volatility. -Achieving diversified exposure to an entire market through market indices. -Achieving transactional efficiency through reducing the cost of achieving a required exposure. Risk analysis The trustees are responsible for the risk management and investment decisions of the fund, including those relating to derivatives. Although professional advice may be sought, the ultimate responsibility remains with the trustees. There are various types of risks associated with derivatives. These can be broadly categorized under the headings of market risk, basis risk, liquidity risk, credit risk, and legal risk. These risks are described below. Market Risk Market risk is the risk of adverse movements in markets. It arises through the holding of any financial instrument, physical or derivative, which creates exposur